NANYANG COMMERCIAL BANK v. WONG CHI KEUNG

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J U D G M E N T

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Power, J.A.:

1. This is an appeal against a refusal by Mayo, J. to set aside a default judgment obtained by Nanyang Commercial Bank Ltd., (the bank) against Mr. Wong Che-keung (the appellant) on 13th April 1988. The Statement of Claim set out that Kings Dyeing and Weaving Factory Ltd. (in liquidation) (Kings) was a customer of the respondent bank and was indebted to it in the sum of $16,007,123.13. The particulars of the indebtedness specify that $12,115,383.99 was owed by reason of advances made on inward bills $1,498,545.17 was owed upon an overdraft account $1,725,263.98 was owed under a letter of guarantee, being money paid to the Water Authority by the Bank, and $667,929.99 was owed under another letter of guarantee, being money paid by the bank to the China Light & Power Co. Ltd. It was pleaded that the appellant entered into seven separate guarantees whereby he guaranteed and agreed to pay and satisfy to the bank, on demand in writing being made to him, all sum of moneys, debts and liabilities whether certain or contingent whether then or at any time thereafter owing or incurred to the bank from or by Kings together with interest, commission, fees and other charges in an amount not exceeding a total sum of $17,715,000.00 and interest. The Statement of Claim then set out the seven guarantees, the first of which was dated the 18th of March 1980 and the last the 9th of April 1586, and pleaded that due demand had been made.

The Chronology

2. The Writ with the Statement of claim indorsed thereon was issued on 21st March 1987 and was served by post on the appellant on the same day No acknowledgement of service was filed and on the 13th of April 1987 judgment in default was entered.

3. A Writ of fi. fa. was issued on 16th April 1987 and the bailiff called at the defendant's premises for the purpose of execution on the 1st of May 1987. It appears that the appellant was absent and the bailiff did not proceed to levy execution. The bank then made an application for examination of the appellant as a judgment debtor under 0.49(8) and an order for his examination was made on 5th May 1987. This order was served on the appellant at the offices of his solicitors Messrs. King & Co. on 15th May 1987 and his solicitors filed a Notice to Act on the same day. On 27th May the examination of the appellant was adjourned to allow dates to be fixed and the appellant was ordered to produce certain documents. On 2nd June 1987 the bank made an application to charge certain property of the appellant. It was subsequently discovered that the appellant had purported to sell this property to Preble Co. Ltd. which was a company owned and controlled by his children. On 3rd June 1987 a Charging Order Nisi was made on that property and an action was commenced by the bank against Preble seeking to set aside the sale.

4. On 17th June 1987 the appellant resisted the charging order by filing an affidavit in which he alleged that the property had been sold at the instance of the mortgagee, the Chiyu Banking Corporation. On 18th June the Charging Order Nisi was discharged, and on the 23rd the respondent bank filed a Notice of Appeal against the order of discharge On 13th July 1987 Nazareth, J., after hearing the appeal, made the Charging Order absolute. There has been no appeal from that judgment

5. On the 1st of July when the appellant was examined under the order of 5th May he made no objection that he was not liable under the judgment. In the course of this examination garnishee orders against five banks and a further charging order were made. All of the garnishee orders were made absolute and there has been no appeal from those orders. On 10th August 1987 the appellant successfully made application, supported by affidavit, to have the examination adjourned for reasons of health. Again no allegation was made at that time that the appellant was not liable on the claim.

6. On the 28th of August the respondent bank sought a further charging order on other properties and an order nisi, having been made on the 3rd of September, was made absolute on the 30th of September. On 9th October 1987 a Notice of Change of Solicitor was given by the appellant, an application was made by summons to further adjourn the cross-examination of the appellant, and a summons was taken out to set aside the default judgment. On 9th and 12th October Mr. Ribeiro, an assistant solicitor of the appellant's new solicitors, filed two affidavits to the second of which a draft defence was exhibited.

7. The appellant filed an affidavit on 11th January 1988 in which he confirmed that the factual matters pleaded in a revised draft of the defence were true and accurate. It is to be noted that this was just short of six months since the entry of judgment and that during those six months the appellant had been heavily involved, with the assistance of his then solicitors, King & Co., in resisting the endeavours of the bank to enforce their judgment.

The Revised Draft Defence

8. It is not easy to divine the exact nature of the defence from the words of the revised draft.

9. Paragraph 5, which will later be set out in full, appears to allege a negligent breach of a specific instruction. This breach, it is suggested, consisted in the failure of the bank to draw up and send to the appellant a form of guarantee which, if it had been, as it should have been, in accordance with the notice given to it, would have been limited in its terms to a guarantee over the specific advance. The defence raised seems to be one of negligence, namely a negligent breach of a specific instruction given by a client to his banker. The defence also pleads a breach of duty owed by the bank by reason of a fiduciary relationship between itself and the appellant. This relationship is pleaded in para. 10 which asserts that under it the respondent owed the appellant a duty to advise him of the purported nature, terms and extent of the banking documents it required him to sign. This paragraph also seems to rely on the failure to act in accordance with the terms of the notice as it pleads a breach of duty to ensure that the banking documents accorded with the specific and limited guarantee "intended" to be given by the appellant.

The Decision of Mayo, J.

10. On 18th January 1988 the summons to set aside was heard by Mayo, J., and he refused the application in a judgment delivered on 28th January. The judge understandably remarked in his judgment that:

"Delay of this magnitude requires some explanation particularly bearing in mind that the defendant accepts that the said default judgment was a regular judgment."

11. The trial judge, rightly in my view, stated that these were two limbs to an application where a regular judgment such as the present one is sought to be set aside. The first is that an explanation should be given as to how it came about that the judgment was entered, and the second is that the defendant must demonstrate that he has a defence on the merits. He quite rightly stated that the first limb involves the exercise of a judicial discretion whereas the second "is a substantive issue". The approach to the second limb is stated clearly by Lord Denning, M. R. in burns v. Kondel⁽¹⁾ where he says:

"In the ordinary way the court does not set aside a judgment in default unless there is an affidavit showing a defence on the merits. That does not mean that the defendant must show a good defence on the merits. He need only show a defence which discloses an arguable or triable issue."

12. Mayo, J. set out the facts in the followingway:

    "Put simply the defendant claimed to have had a friendship with a Mr. Chong who at the relevant time was the General Manager of the Plaintiff. He said that when he entered into the guarantees in question, it was his impression that the guarantees were much narrower in scope than the guarantees in fact proved to be.

    He accepted Mr. Chong's assurance to the effect that the guarantees were in the best interest of Kings and himself.

    He had no knowledge of the English language and was certainly unable to read and understand documents written in the English language. Also he is of advanced age and in very poor health.

    After the writ and statement of claim had been served upon him he had gone to his former solicitors Messrs. King & Co. to seek legal advice. He had been advised that no useful purpose would be served by his attempting to defend the action. In effect it would be a waste of time and money to defend the action. On the basis of this advice he had allowed the judgment to enter against him in default.

    It was only when he had encountered difficulties with his examination under 0.49(B) that he had decided to obtain from the liquidator of Kings the necessary documentation. A decision had then been made to instruct his present solicitors who in turn obtained counsel's opinion. After receiving an opinion, he had decided to make the present application."

13. Mayo J., with, in my view, good reason, made the following comment as to the way in which the appellant had presented his case:

"The defendant chose to present his case on the basis of a short introductory affirmation claiming that he has a defence and exhibiting to it a form of proposed draft defence. In the affirmation he swore that the facts pleaded in the Defence were true.

    While I realize that this is often the manner in which such applications are made, it is not without its difficulties."

14. One serious flaw which the judge found in the explanation was that the appellant had made no attempt to provide details of the instructions which he gave to King & Co. when seeking advice after having been served with the writ. He stated:

"that in the absence of some explanation as to how it came about that he received the advice he did from Messrs. King & Co. the excuse which has been given for the delay is unconvincing and not of such a nature that I should validly exercise the necessary discretion in his favour."

 Mayo J. did, however, then go on to consider the defence advanced and found that he was not satisfied "that the defendant had shown that he had an arguable defence and so the exercise of the discretion becomes redundant." He was materially influenced in arriving at that conclusion by the fact that the appellant had not seen fit to exhibit before him any of the seven guarantees nor had he produced any of the seven minutes of the meetings of the directions of Kings which, it was suggested, were sent to the bank and had put it on notice as to the limited form of guarantee into which the respondent was prepared to enter. Mayo J. said:

"All I have is the vague assertion on affirmation by the defendant that it was his impression that the guarantees were of a limited nature and only related to the specific facilities being granted and it was not his intention to enter into the unlimited guarantees of the nature being claimed. This is totally unsatisfactory and I do not think that the defendant has discharged the burden I have referred to of satisfying me that he has an arguable defence."

15. The judge then went on to say that there were "a number of highly unsatisfactory matters ... which further convince me that it would be wrong for me to grant the relief which is being sought". He found the suggested defence to be "woefully lacking in particularity". He pointed particularly to the fact that the appellant had not given any particulars "as to the physical circumstances when any of these guarantees were entered into". He found further that there were no particulars to establish that there was any "mutual agreement" that the scope of the guarantees was to be limited in the way suggested by the appellant. He said finally that, on the material before him, he did not "think the defendant has any prospect of establishing any fiduciary relationship of the type claimed" nor "any better prospect of establishing that the plaintiff or Mr. Chong have exercised undue influence over him or that they have been in any way negligent."

The Issues on Appeal

16. In argument before this court Mr. Swaine, Q.C., who appeared with Mr. J.J.E. Swaine for the appellant, has further contended that, even if no fiduciary relationship can be established, the appellant can rely upon a breach of a common law duty of care.

17. As the appeal has been argued, the matters which lie for the decision of this court are whether the judge:

(1) Erred in holding that the appellant's explanation was not of such a nature that the necessary discretion should be exercised in his favour.

(2) Erred in failing to hold, on the material before him, that the following matters had been established as triable issues:

i) whether the bank had, in each case, been given notice that the appellant had only agreed to enter into a limited form of guarantee.

ii) whether the bank owed the appellant a fiduciary duty which it breached when it obtained unlimited guarantees from him.

iii) whether the bank owed the appellant a duty at Common Law which it breached when it obtained the said guarantees.

18. When the hearing of the appeal opened, Mr. Swaine sought to amend his notice of appeal. Leave was given for him to do so, but in the outcome the matters contained in the amendment were not pursued. He also sought leave to file two affidavits and these were, by consent, read de bene esse. The purpose of these affidavits was to fill some of the evidential gaps which the trial judge considered existed in the case presented to him by the appellant.

(1) Did the judge err in holding that the appellant's case was not of such a nature that the necessary discretion should be exercised in his favour?

19. The judge held that "the excuse which has been given for the delay is unconvincing and not of such a nature that I should validly exercise the necessary discretion in his favour:" Mr. Swaine argued that the appellant's reasons were proper ones and that they ought not to have been criticized by the judge. He subnitted that the propriety of the defendant's explanation was demonstrated both by his own affidavit and by the independent evidence of Mr. Terence Houang, a nephew of the appellant, contained in the first of the affirmations read de bene esse. The latter evidence was, of course, not before the judge.

20. The appellant stated in his affidavit that he was 73 years of age and that he had been a director of Kings from the 1960s to mid 1986 and that he and his brothers, who were now deceased, were the founders and majority shareholders of the company. He said that the banking documents and other documentation relating to banking facilities were kept in the accounts department of Kings and that after Kings was wound up in July 1986 the Official Receiver took possession of Kings assets and its files and books including the documents relevant to this action. He said that being unable to read the contents of the writ because he was unable to read English he only knew what was claimed against him (on the basis of that claim) from consultation with his then solicitors, Messrs. King & Co. He said that he had no copies of any documents relating to the claim, that he and did not know how he could gain access to those documents and that Messrs. King & Co. did not advise to attempt to seek copies from the liquidators. He also said that he was advised by Messrs. King & Co. not to defend the action or retain counsel or incur any expense in litigating, and that because of this advice, he did not instruct them or any other solicitors to proceed with the matter on his behalf.

21. Mayo J. considered this evidence to be so lacking in particularity that it constituted "a serious flaw" in the fabric of the explanation for delay. I find myself in complete agreement with this observation. While it may be that the appellant was unable to read English, it is in my view unthinkable that he failed to ascertain, either by looking at the figures in the writ or by making enquiry from his solicitor, that the claim against him was for more than $16,000.00, an amount very much in excess of the total of the amounts which he says the bank had been told he was prepared to guarantee. When assessing the evidence in this matter one must not lose sight of the fact that the appellant was a very experienced businessman. It may be that he was no longer young and was not in the best of health, but there was no suggestion that his mental faculties were failing. Further the difference between the amount claimed and the amount alleged to be owed did not arise out of some minor accounting discrepancy but, according to the appellant, is a massive misstatement of his indebtedness in the amount of some $10,000,000 and that he did not realise this even though he had placed himself in the hands of his solicitors for a period of some 6 months following the service of the writ.

22. It is suggested that the appellant's explanation of the delay is much more convincing when looked at in the light of the affirmation of Terence Houang. Mr. Houang affirmed that within a few days of the receipt of the writ he went to see Mr. Bernard Tam of Messrs. King & Co. at his uncle's request and that Mr. Tam advised that the claim was on his uncle's personal guarantees and that there was no defence to it. He says that, to the best of his knowledge, Mr. Tam had not seen any of the guarantees but gives no details of the conversations that took place before the advice was given. He says that shortly after this meeting he accompanied his uncle to see Mr. Tam who repeated his advice that there was no defence and recommended that his uncle should not defend the action, retain counsel or spend money on litigating.

23. In my view this additional evidence does little to assist the appellant. It is just as lacking in particularity as to what was said on the occasion of the visits to the solicitor as is the evidence of the appellant. What, it might be asked, was the reason for this second visit? It would seem that all that occurred was that the advice already given was repeated and that no attempt of any sort was made to clarify, discuss, or enlarge upon that advice. Further, as Mr. Ching Q.C., who appeared with Mr. Maxwell-Lewis for the bank, pointed out, we are not assisted by any affirmation from Mr. Tam as to what took place on these occasions. But for the fact that it is clear law that the major consideration is whether the appellant has a defence on the merits and that this transcends any reason given by him for delay: Vann & another v. Awford & others⁽²⁾, I would have been inclined, as would Mayo J., to have exercised my discretion against the appellant. 1 would add that I think it proper, in the circumstances that the court look with particular scrutiny at the evidence the appellant places before it when he comes to urge that all along he has had an arguable case.

2(i) Did the judge err in failing to hold that there was a triable issue as to whether the bank had in each case been given notice that the appellant had only agreed to enter into a limited form of guarantee

24. The draft defence sets out the facts as to the giving of notice as follows:

"4. The Defendant was at all material times a principal shareholder in and a director of Kings and of Corona Corduroy Factory Limited (hereinafter referred to as "Corona"). Both such companies had been founded by the Defendant and/or his family, and the Defendant had close association with them. On numerous occasions from 1972 to the date of its liquidation in 1986, Kings requested and was provided banking facilities by the Plaintiff, including various overdraft, post-dated cheque, letter of credit, inward bills, trust receipt and bank guarantee facilities.

(2) The Times, April 23rd, 1986

5. Such requests by Kings were made orally and/or in writing to the Plaintiff, and, where written, would include a copy of such minute of the board of directors of Kings as had been passed, resolving that application be made for the particular banking facility then in question. On various of such occasions, the Defendant had agreed with Kings to give a personal guarantee over the particular facility then requested, notice of which agreement was given to the Plaintiff by Kings orally and/or by the recital of such agreement in the copy board minute sent to the Plaintiff as aforementioned. Consequent thereon, and in order that the specific banking facility as then in question be provided to Kings, the Defendant was called upon by the Plaintiff to sign, and did sign, such of the Plaintiff's standard banking documents as were for that purpose provided by the Plaintiff to the defendant." (The underlining is mine.)

25. It is not easy to ascertain with exactness what the appellant intends to convey in these paragraphs. Paragraph 4 says that "on numerous occasions" from 1972 to 1986 Kings requested and was provided banking facilities by the bank. Paragraph 5 says that "such requests were made orally and/or in writing and where written would include a copy" of the relevant minute of the board of directors of Kings. We know however from the affirmation of Mr. Tsui Shu Wing, the second affirmation read de bene esse, that this practice started only "from about 1984".

26. Paragraph 5 goes on to say that "on various of such occasions" the appellant having "agreed with Kings to give a personal guarantee over the particular facility" notice of the agreement was given to the bank by Kings "orally and/or by recital of such agreement in the copy board minute sent to the bank".

27. Nowhere does the pleading state when or by whom or in what terms the notice, if oral, was given. Nowhere does it state whether the notice was only oral or only written or both oral and written and, more remarkably, nowhere does it state whether the notice, whatever form it took, was ever given as regards any of the 7 guarantees sued upon. While it is true that the appellant swore that "the facts" in the draft defence were "true and accurate" one might well ask, after reading paragraphs 4 and 5, exactly what "facts" it was that he was confirming. Had his affidavit set out the "facts" in those paragraphs it would have been open to justifiable criticism upon the ground that it failed to give any particulars of the alleged notice and failed to state whether the notice was given in the case of the 7 guarantees. Such evidence could not but be regarded as wholly unsatisfactory and Mayo J. was, I am satisfied, right to take the attitude to it which he did.

28. The amplification of this matter in the affirmation of Mr. Tsui Shu Wing, the second of the affirmations being read de bene esse, is of no. real assistance to the appellant. He said that "generally in obtaining a new banking facility for Kings or, as the case may be, in renewing an existing facility Mr. Wong would first deal with the bank by telephone. He spoke with Mr. Chuang Shih Ping directly, or with one Wong Kiu Sun, whom I believe to have been working in the bank's Loans Department." (Mr. Chuang is presumably the same person as the Mr. Chong referred to in the draft defence) This evidence indicates that the notice stated in para. 5 of the defence to have been given to the respondent bank "by Kings", was in fact given by the appellant himself in a telephone call to the bank: If this be so, the appellant was clearly in a position to know the exact nature of the oral notice given to the bank. Thus the lack of particularity referred to above is all the more objectionable.

29. This affidavit does however have exhibited to it copies of the bank guarantees, the subject, of the claim, and the various letters and board minutes which relate thereto. The first guarantee is dated 18/3/80 and annexed thereto is an extract of a letter from Kings to the respondent bank dated 3/3/80 which requested that the limit of trust receipt be increased to HK$4,000,000. This contains no mention of the giving of any guarantee and was, presumably, one of the cases in which the offer to give a guarantee was made orally.

30. The second guarantee is that of 1/8/83. This arose out of a transaction with China Resources Textiles Co. Ltd. in which Kings applied for a temporary trust receipt amount in HK$1,300,000. There is a letter of request dated 21st July 1983 annexed thereto but there is no mention therein of any guarantee being offered by the applicant. Again this must be one of the matters where the agreement was oral.

31. The third guarantee is that of 28/9/84 and is a request that the bank act as guarantor for the water deposit in the sum of $1,943,000. Again there is no mention of any offer by the appellant to enter into a guarantee the bank with regard to that amount.

32. The fourth guarantee is dated 23/11/85. Exhibited together with that guarantee is "an extract of a board minute of Kings Dyeing and Weaving Factory Ltd." This is dated 6th November and it recites that "due to the maturity of the facility for the Letters of Credit to the extent of $2,000,000 on 22nd November 1985 it was unanimously resolved to renew the said facility for one year and that Mr. Wong Che Keung will be personal guarantor of the above facility". It bears the notation "To: Nanyang Commercial bank" and it is signed by Mr. Wong Che Keung. This would appear to be the first occasion on which a copy of the minute was sent in accordance with the requirement of the bank.

33. There are two guarantees dated 8/1/86. Annexed to the first, which guaranteed the sum of $6,000,000, is a copy of a minute which states that King's credit facilities at Nanyang bank in "the amount of $6,000,000 and a cheque discounting facility in the amount of $1,700,000 are due to mature on 26th January 1986 and says that it "is resolved that, to cope with the needs of the business and now having applied to the bank, the above two facilities have been renewed for six months until 20th July. Mr. Wong Che Keung would act as the personal guarantor for the said facilities". This copy minute does not bear any notation which would indicate that it was sent to the respondent bank. However, the affidavit of Mr. Tsui suggests that this would have been done.

34. The other guarantee of 8/1/86 is in the sum of $1,700,000. The minute annexed of this guarantee refers to both the sum of $6,000,000 and the sum of $1,700,000 and also states that "Mr. Wong Che Keung shall act as guarantor in respect of the said credit facilities." Again neither of these minutes bears a notation that they were sent to the bank. But again the suggestion seems to be that they were in each case transmitted to the bank.

35. The final guarantee dated 7/4/96 has annexed to it a mintue dated 27th March 1986 which reads as follows:

"Resolution: To write to the Nanyang Commercial Bank Ltd. to seek assistance in respect of the letter of guarantee to China Light & Power Co. Ltd. for the sum of $772,000. Mr. Wong Che Keung shall give a personal guarantee in respect of he facility and it is agreed that the overdraft facilities of the company in the bank will decrease by an amount of $33,900."

Again there is no notation on this minute to indicate that it was sent to the respondent bank. And again the suggestion appears to be that it was.

36. Having found that there was no satisfactory evidence of oral notice I look to see whether there is any evidence that written notice was given to the bank in the copy minutes which it is suggested were sent to it. The minutes state that the appellant either "will be personal guarantor of the above facility" or "would act as a personal guarantor for both of the said facilities" or "shall act as the guarantor in respect of the said credit facilities", or "shall give a personal guarantee in respect of the facility".

37. It is the argument of Mr. Swaine that this information must have conveyed to the bank that the guarantee to be given by the appellant would in each case be in respect of and limited to the facility granted. His argument, put in another way, is that this conveyed to the bank that the guarantee which the appellant was prepared to give, was one strictly limited to the liability incurred by icings by reason of the facility granted find myself unable to agree with this contentions. I am satisfied that, in each case, the words did no more than convey to the bank that Mr. Wong would be the guarantor of the facility. They give no indication as to the nature of the guarantee. When determining whether any arguable defence has been raised by the suggestion that written or oral notice or both was given to the bank I bear in mind the words of Ackner L.J. (as he then was) in Banque de Paris v. de Naray⁽³⁾ where he said, when dealing with at 0.14 application, at 23:

"It is of course trite law that 0.14 proceedings are not decided by weighing the two affidavits. It is also trite that the mere assertion in an affidavit of a given situation which is to be the basis of a defence does not, ipso facto; provide leave to defend; the Court must look at the whole situation and ask itself whether the defendant has satisfied the Court that there is a fair or reasonable probability of the defendants' having a real or bona fide defence."

These observations are qually applicable to the present situation in which, when I "look at the whole situation" I am far from satisfied that the appellant has established any arguable case grounded upon the giving of any notice.

(2)(ii) Did the judge err in failing to hold that there was a triable issue as to whether the bank owed the appellant a fiduciary duty which it breached when it obtained unlimited guarantees from him ?

38. The appellant pleaded; in paragraph 7, that at all material times he "reposed confidence in and relied upon the plaintiff and the plaintiff exercised influence of the defendant in connection with the aforementioned granting of banking facilities by the plaintiff to Kings and the giving of guarantees by the defendant over such facilities." This pleading continued, in paragraph 8, that:

"Such confidence and reliance arose consequent upon the close relationship of the defendant with the then General manager of the plaintiff on Chong Sui Ping (hereinafter referred to as 'Mr. Chong') who acted at all such times on behalf of the plaintiff. The defendant was a personal friend of Mr. Chong from about 1950. Consequently, Mr. Chong had introduced to the plaintiff, through the defendant, the custom of Kings and Corona, in the early and mid 1970's respectively. Thereafter Mr. Chong had given numerous and repeated assurances to the defendant that the plaintiff was acting and would continue to act in the best interest of the defendant. Kings and Corona upon which assurances that the defendant relied and by reason whereof the plaintiff had to continue custom of kings & Corona through the defendant."

39. This part of the pleading in my view does no more than allege that the appellant. had formed a friendship with Mr. Chong and believed his assurances that he would not act otherwise then in the best interest of the appellant.

40. The pleading however goes on, in paragraph 9 to state that:

"the defendant relied to the fullest extent upon the plaintiff in all matters regarding the banking documents provided by the plaintiff for the defendant's signature in the manner hereinabove pleaded. As was known at all such times to the plaintiff, the defendant did not read or write the English language, and in particular could not read or comprehend the banking documents signed by him. Moreover, the defendant was aged and by reason in particular of partially deafness, heart disease and stroke was infirm."

It is then pleaded, in paragraph 10 that by reason of these facts there arose a "fiduciary relationship by reason whereof the plaintiff owed to the defendant duties of care and of good faith. In particular, the plaintiff owed to the defendant the duty to advise him of the purported nature, terms and extent of the banking documents required by the plaintiff to be signed by him, and, in any event, the duty to ensure that such banking documents did accord in their purported nature, terms and extent with the specific and limited guarantees intended to be given by the defendant, as pleaded in paragraphs 5 and 6 above." pargraphs 5 and 6 having been held not to disclose anything upon which the appellant could rely to establish an anguable case, it must be asked whether the other matters referred to in paragraphs 7 to 10 disclose an arguable defence of breach of fiduciary duty.

41. I bear in mind that Mr. Tsui Shu Wing, in the affidavit to which I have already referred, said that the appellant came "to trust in the bank to the, extent that he relied heavily on it in banking matters including those which affected him personally". I am conscious, moreover, that I must look at the pleading and the affirmation in the round and that it would not be fair to isolate inadequacies in particular paragraphs. When I do so I find, however, that this gives little assistance to the appellant. The fiduciary duty arises to a substantial extent, the pleading suggests, from the fact that the appellant reposed confidence in the plaintiff because of a close relationship between himself and Mr. Chong, the General Manager of the plaintiff. I pause to remark that such a confidence reposed by a customer in his banker could hardly of itself, give rise to a fiduciary relationship. The pleading, however, goes on to say that the appellant introduced to the bank through Mr. Chong the customer of Kings and Corona. Again this fact would, of itself, not establish any fiduciary relationship. The pleading then says that Mr. Chong gave numerous and repeated assurances to the appellant that the bank was acting and would continue to act in the best interest of the appellant, Kings and Corona and that the appellant relied upon these assurances. Assuming that these assurances were given, one must look at them to see what they could have been taken to mean. Clearly a bank manager when giving such an assurance could not be taken to mean that he would act in the interests of the client contrary to the interests of the bank. Anyone being given such an assurance and bringing his commonsense to bear on the matter could take it to mean no more than that the manager was saying that he would at all times deal fairly and honestly with the client. Such an assurance would anyway be implicit in any banker and client relationship. Making it explicit goes no way, in my view, towards the establishment of a fiduciary relationship. It is, however, further pleaded, in an endeavour to establish this fiduciary relationship, that the appellant relied to the fullest extent upon the respondent bank in "all matters regarding the banking documents provided by the plaintiff for the defendant's signature in the manner hereinabove pleaded" and that the bank knew that the defendant did not read or write English and could not read or comprehend the banking documents signed by him. The pleading also states that the appellant was aged and infirm and partially deaf but does not suggest that he was not fully compos mentis.

42. Given that he was an experienced businessman and that there is no suggestion that his mental faculties were in any way failing, it is difficult to see that any weight can be given to the fact chat he was aged and infirm.

43. While it may be that the appellant relied upon the respondent bank, is the fact that such a client relies upon his bank sufficient to establish a fiduciary relationship? The facts pleaded seem to me to establish no more than that a banker and client relationship had come into existence and which, because of its long standing and because of the friendship that grew up between the appellant and Mr. Chong the manager, had become a particularly close one. Mr. Swaine submitted that the relationship was such as was described by Lord Chelmsford L.C. in Tate v. Williamson⁽⁴⁾. He referred as to the following citation at 61:

"Wherever two persons stand in such a relationship that, while it continues, confidence is necessarily reposed by one, and the influence which naturally grows out of that confidence is possessed by the other, and this confidence is abused, or the influence is exerted to obtain an advantage at the expense of the confiding party, the person so availing himself of his position will not be permitted to retain the advantage, although the transaction could not have been impeached if no such confidential relationship existed." (my underlining)

Lord Chelmsford uses the words "confidence is necessarily reposed by one ...." The circumstances must, in my view, be such as to show that one party is, in effect, in the power of the other, so that he will, almost inevitably, be overborne by suggestions made by that other. There is nothing in the facts pleaded to indicate that the appellant was in the power of the bank. The relationship pleaded is a family normal banker and client relationship, albeit one characterised by a degree of intimacy which had grown up because of the friendship between the appellant and Mr. Chong I am not satisfied that the facts pleaded would be sufficient to establish any fiduciary relationship.

44. I feel it proper to state that even if the facts were capable of sustaining a view more generous to the appellant I would, in applying the approach in Banque de Paris v. De Waray, and looking at the whole situation, be far from satisfied that there is any "fair or reasonable probability of the (appellant's) having a real or bona fide defence" on the basis of a breach of fiduciary duty.

2(iii) Did the Judge err in failing to hold that there was a triable issue as to whether the bank owed the appellant a duty at common which it breached when it obtained the said guarantees.

45. No such breach of duty was, as Mr. Ching pointed out, ever pleaded. The suggestion must be that there is a duty of care on a banker when dealing with a client who is an experienced businessman to explain to him the nature of documents which, the pleading itself states, are "the plaintiff's standard banking documents".

46. Putting aside the existence of any notice, I must ask myself what duty was owed to a customer in the position of the appellant by the bank when he indicated to it that he was prepared to guarantee a loan to be made to his family company. It was clearly for the bank to determine the conditions which it would require in the guarantee. It must be remembered that the bank was dealing with an experienced businessman with whom it had had dealings over a number of years. It must be remembered also that the loan was one requested by Kings. It was not the situation that the bank was trying to persuade Kings to borrow money. The draft defence admits, as I have said, that the guarantee was entered into on one of the "standard banking documents". The authorities show that the duty of care owed by a bank to any individual customer relies very much upon the circumstances of the relationship and the extent to which the bank had involved itself in negotiating on behalf of and giving advice to the customer. (See National Westminister Bank v. Morgan⁽⁵⁾ and Rust v. Abbey Life Assurance Co. Ltd. & Another⁽⁶⁾.) I am satisfied, in the present case, that the law did not impose any duty upon the bank to explain to the appellant the extent of liability imposed upon him by the guarantees given to him to sign. I am satisfied that it is wholly unrealistic to suggest that, when an experienced businessman approaches the bank indicating that he is prepared to guarantee a loan being given to a third party and is presented with a standard form of guarantee by the bank, the bank is then under a duty to explain the terms of that guarantee to him. The fact that he does not speak English, that the guarantee is written in English and that the bank knows this to be so, does not seem to me to affect the matter. He has indicated willingness to enter into a guarantee and he has been given one acceptable to the bank. It is for him then either to sign it or, if he wishes to do so, to take independent advice before so doing. Given, as I have already found; that nothing has been placed before the court upon which reliance might be placed to establish that notice that the guarantees were to be limited was given to the bank, I see no defence which would have any chance of successfully establishing that the bank was in breach of a common law duty of care.

47. I refer finally to the suggestion that a letter exhibited to Mr. Tsui's affidavit from the bank to the accountants of Kings dated 30th September 1986 is couched in terms that are tantamount to an admission that the guarantees were limited and not general ones. This suggestion is made because the letter sets out the guarantees one by one and refers to them as being personal guarantees issued by Mr. Wong and in each case referable to the amount of loan advanced. I am not satisfied that this letter contains any implied admission. It is the way I would expect the bank to identify the guarantees which it held by making reference to the specific facility guaranteed.

48. I am satisfied that when the whole situation is examined the affidavit evidence is not sufficient to raise an arguable case or triable issue which ought to go to trial. I am satisfied that the trial judge was right to find as he did that the material placed before him was "totally unsatisfactory" and that the appellant had not "discharged the burden ...... of satisfying me that he has an arguable defence." The appeal must thorefore be dismissed.

49. I do not need to dea1 with the application to allow the two further affidavits to be filed other than to say that even if information in those affidavits was before the court I would, as I have indicated, have nonetheless been satisfied that the appeal should be dismissed.

Fuad V.-P.:

50. I agree that the appeal should be dismissed. In my judgment, too, Mayo J. was fully justified in refusing to set aside the regular judgment which had been obtained, on the grounds advanced. I do not think that the additional material sought to be placed before us in any way improved the appellant's case which I have concluded was wholly unmeritorious.

Macdougall, J

51. Although it is true that, in seeking to set aside a judgment in default, a defendant need only show a defence which discloses an arguable or triable issue, it should not be thought that, in determining whether he has succeeded in so doing, the court is bound to accept uncritically the material that he puts forward.

52. For the reasons given by Power, J.A. I agree that the appeal should be dismissed.

Fuad, V.-P.:

53. In handing down these judgments, we make an order nisi that the appellant shall pay the respondent's costs of the appeal.

(1) [1971] Lloyd's Rep. 554 at 555

(2) The Times, April 23rd, 1986

(3) [1984] 1 L.L.R. 21

(4) L.R.2 Ch.App. 55

(5) [1985] 2 W.L.R. 588

(6) [1970] 2 L.L.R. 386